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Leveraging the HIRE Act and
Smart Hiring StrategiesSeptember 15, 2010
HREX Series:
Joyce Nelson
Partner & Vice President Client Services
Advex-Advancing Excellence, Inc.
Scott Buchanan
President
Human Resources, Inc.
From Surviving to Thriving:Growing on a Budget
Hire Incentives to Restore Employment Act (HIRE): 6.2% FICA Exemption
Health Reform Act
Smart Hiring Strategies
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Agenda
Was the replaced employee separated voluntarily or
terminated for cause?
Wages do not qualify for exemption
Did employment begin after February 3, 2010?
Were wages paid to employee after March 18, 2010?
Did the employee work more than 40 hours during the 60 day period ending on the date of employment?
Did the employee replace another employee?
Is the employee related to the employer (related to anyonewho owns more than 50% of the employer?)
Did employee complete Form W-11?
Wages paid to employee after March 18, 2010 qualify for the exemption
from the 6.2% FICA tax.
YES
YES
NO
NO
NO
YES
NO
NO
YES
YES
YES
YES
NO
Qualifying for the Exemption from FICA Tax Under the HIRE Act
(as of March 18, 2010)
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Without HIRE With HIRE
FICA 6.20% 0.00%
Medicare 1.45% (1) 1.45% (1)
FUTA 0.80% (2) 0.80% (2)
SUTA 2.70% (3) 2.70% (3)
Total 11.15% 4.95%
1) Scheduled to increase for certain high income individuals
2) May increase to 1.10% in those states that do not timely repay Federal loans
3) Starting rate for new employer
NB: A retention benefit of $1,000 is also available.©HREX-Human Resources Excellence. All Rights Reserved.
HIRE Act Example:Employer’s Portion of Payroll Taxes
WOTC = Work Opportunity Tax Credit
Can’t double dip on same wages.
HIRE Act benefit is more certain and immediate but WOTC may provide a greater benefit.
Can take WOTC and the retention benefit from the HIRE Act.
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WOTC or HIRE Act?
Present and Future
Obama Administration credits the HIRE Act for 5.6 million new hires in the first 6 months of the program;
US Senator Charles Schumer (D-NY) is calling for a 6 month extension of the Act
Expect election year activity
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HIRE Act Present & Future
Employer does not qualify for credit
(1) See transition rule for 2010
Does the employer pay a uniform percentage of premiums for each employee enrolled? (1)
Does employer pay at least 50% of the premium for single coverage?
Does the employer have fewer than 25 full-time equivalent employees for the tax year (see worksheet)?
Are the average annual wages (see worksheet) for the tax year less than $50,000?
Employer qualifies for credit.
YES
YES
YES
YES
YES
NO
NO
NO
NO
NO
Eligibility for Small Business Health Care Tax Credit
Does employer provide health care coverage?
(as of March 30, 2010)
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For tax years 2010 through 2013– Tax credit up to 35% of employer’s portion of premium if employer
pays at least 50% of a benchmark premium
For tax years 2014 & 2015– Eligible small businesses that purchase coverage through the State
Exchange will receive a tax credit up to 50% of the employer’s portion of the premium if that portion is at least 50% of total premium cost
Phase Out– This credit gradually phases out for firms with average wages between
$25,000 and $50,000 and for firms with the equivalent of between 11 and 25 FT workers.
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Health Care Act Credit & Phase Out
Facts
ABC Company
40 PT employees = 20 FT employees
Wages $500,000 or $25,000 per employee
Employer paid health insurance premium $240,000
Credit Computation
(1) Initial credit before phase out $240,000 x 35% $ 84,000
(2) Credit reduction for employees in
excess of 10 ($84,000 x 10/15) ($56,000)
(3) Credit reduction for wages in excess of $25,000 0
(4) Total 2010 Tax Credit $ 28,000
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Health Care Tax Credit Example
SMART HIRING
STRATEGIES
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Survive
Thrive
Excel
Effectiveness in driving results through people?
Ability to execute - right mix of people, tools and practices?
Large labor pool?
HIRE Act: cost of extra person vs. risk of lost opportunity?
Survive
Thrive
Excel
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Challenges & Opportunities
Performance Effectiveness
Effective Management
Practices
Leadership Effectiveness
Talent Recruitment Selection & Retention
Team Effectiveness
KPI’s & Metrics
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The People Side of a Successful Business
a) Hard to do well
b) Time-consuming
c) The most important thing you do
d) All of the above
Hiring is your hardest job but vital to your business’ success
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Hiring Is…
3-15 times individual salary (20% direct 80% indirect cost)
Over 80% of recruitment decisions based on biographical
interviews with some form of reference check.
On average, 45% of new hires leave in the first 6 months, and
15% of new hires are fired within the first year*
* Charles A. Handler, Ph.D. (2009) Using Technology to Support Informed Decision Making Within the Hiring Process
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Real Cost of a Bad Hire
89%fail for reasons that have nothing
to do with skills or abilities
‘Failed’ employees rarely fail because they
aren’t smart.
They fail because they don’t fit.
Coachability 27%
Emotional Intelligence
24%Motivation
17%
Temperament
15%
Competence 11% Other 6%
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Why Hires Fail – Success is More Than Skills
1. Inadequate salary and benefits.
2. Limited opportunities for advancement.
3. No recognition for good work.
4. Unhappy with management, how they were managed or didn’t connect.
5. Bored with the job
6. Other (retirement, career change)
15%
20%
25%
30%
5%
5%
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Top Reasons Why People Quit Their Jobs?
1. We don’t really know what we are looking for.
2. We don’t consistently use well-crafted questions to probe
and gather relevant information from each candidate.
3. We rely too heavily on one person’s opinion of the
candidate…usually our own.
4. Our evaluation of the candidates tends to be incomplete.
5. Hiring the ‘Best We’ve Seen’ rather than ‘What’s Best for
the Position’.
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5 Most Costly Hiring Mistakes
42.7%contain false
informationProbe, Probe, Probe….
Take the time, understand how they behave and are wired.
Simple process for identifying and hiring A Players with a high degree of success. It helps you get the “who” right.
“A “Player 90% chance accomplishing outcomes. Good vs. Great
You are Who you hire
Four ‘S’s = ‘A’ Method for Hiring
• Scorecard (= job description with purpose, accountabilities, outcomes, required competencies)
• Source (referrals, professional/personal networks, recruiters etc.)
• Select (structured interviews in pre-screening, top grading, referencing)
• Sell (what matters to candidate: fit, family, freedom, fortune, fun)
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“Who: The A Method for Hiring”*
* Reference: “Who: The A Method of Hiring”, Geoff Smart & Randy Street
Pre-Screening Interview (15-30 min by phone)
1. What are your career goals?
2. What do you excel at professionally?
3. What are you not good at or unwilling to do professionally?
4. Who were your previous bosses and how will they rate you on a scale of 1-10 when we speak with them?
Top Grading Interview (1-2.5 hrs)1. What were you hired to do or what did you do in your previous job?2. What accomplishments are you most proud of?3. What were the low points of your past jobs?4. Who were the people you worked with what will they say about
you? (boss and coworkers specifically)5. Why did you leave that job? (Push – Pull)
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“The A Method for Hiring”: Selection
References: “Who: The A Method of Hiring”, Geoff Smart & Randy Street. ““Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People”, PhD, Bradford D. Smart.
Reference Interview - Be aware of: Not willing to help
Only wants to give dates of employment
Use hypothetical questions
Stick to same questions in screening interview
Background Screening - Job related E.g. Criminal, physical abilities or drug testing, employment, education,
professional license, motor vehicle, fingerprinting, worker’s comp.
Behavioral Assessments determine Organizational FIT :1. Right People in the Right Jobs
2. Identify Training needs
3. Help Managers to be more effective in coaching process
4. Promote People into positions where they will succeed
5. Predictive value of traditional recruiting methods about 14%
6. Increase ability to target “A” Player (90% vs. 50%)© HREX-Human Resources Excellence. All Rights Reserved.
“The A Method for Hiring”: Is it Enough?
On Boarding
Plan to acclimatize new hire for a smooth transition
Orientation and Training
Clearly defined expectations, support etc.
Evaluate Progress (Probation period)
Attracting and Retaining
Evaluate Your Self and Managers first
Create a Culture of Recognition and Accountability
Create a Healthy Work Environment
Create an Atmosphere of Continuous Self-improvement
Put Your Best Foot Forward
Match Right People to Right Jobs
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“You’re Hired!... Now What?
Invest the time at front end to make everything else easier
Systematic and targeted process to hire “A” players who will achieve at least 90% of set outcomes vs. 50%.
Get full picture: skills, experience, attitudes, values, interests, drivers
Probe for the “What” and the “Who” to determine best FIT
Standardized processes minimizes risk of discriminatory practicesand allows for a more objective and thorough evaluation process.
Focus is on attracting and retraining a highly qualified workforce vs. searching needlessly and hiring the wrong talent
The cost of retaining an “A” employee is far lesser than recruiting a new one.
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Value of Recruitment Best Practices
HIRE Act 6.2% FICA exemption
Health Care Act 35% credit
Hiring Best Practices
• Invest time upfront to avoid spending more time managing and firing
• Probe, probe, probe
• Full picture: Who + What + A Method lead to “A” Players
• FIT = The right people on the bus!
• Effective On boarding
• Recruiting and retaining quality talent = #1 priority
Don’t Leave Your People Decisions to Chance…
The Extra Degree of Effort Separates Good from Great© HREX-Human Resources Excellence. All Rights Reserved.
Summary
Q & A?
For more information contact:
Scott Buchanan (727) 895-4700
Joyce Nelson (813) 514-2889
Thank You
2010 St. Petersburg Chamber of Commerce Outstanding Business of the Year Winner
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